Flipkart's journey: From start-up worth Rs 4 lakh in 2007 to e-commerce giant valued at Rs 1.47 lakh crore in 2018 | Here's all you need to know
Walmart is making a $16 billion bet on India's booming economy. It's buying a controlling stake in online retailer Flipkart. The deal gives it direct access to consumers in India, where online sales have exploded. Walmart and Amazon have been fighting to catch up.
Walmart Inc's acquisition of 77% stake in Flipkart for about USD 16 billion (Rs 1.05 lakh crore) in the largest e-commerce deal will give the US retailer access to the Indian online market that is estimated to grow to USD 200 billion within a decade.
The deal, under which co-founder Sachin Bansal and Japan's Softbank Corp Group are exiting, values Flipkart at USD 20.8 billion. It is the biggest M&A deal in India this year.
"Walmart's investment includes USD 2 billion of new equity funding, which will help Flipkart accelerate growth in the future," the US-based firm said in a statement.
They "are also in discussions with additional potential investors who may join the round, which could result in Walmart's investment stake moving lower after the transaction is complete", the statement added. "Even so, the company would retain clear majority ownership," Walmart said.
Google parent Alphabet Inc is seen to be the potential investor who may get as much as 15 per cent.
Two IIT Delhi engineers Sachin Bansal and Binny Bansal started Flipkart in 2007 with Rs 4 lakh, going door-to-door to deliver books, they had no intention to sell their company irrespective of the valuation.
Sachin had categorically said in an interview earlier that he will never sell Flipkart, in which the US retail giant Walmart is finally buying 77 per cent stake for USD 16 billion (Rs 1.02 lakh crore).
The deal values the 11-year-old Flipkart at approximately $21 billion (Rs 1.47 lakh crore)
Flipkart: Selling books online to jaw-dropping valuation deal
Flipkart has given India its big start-up success story -- the one which is likely to be quoted by starry-eyed entrepreneurs for years to come.
Former employees of US e-commerce giant Amazon, Sachin Bansal and Binny Bansal had met in 2005 at IIT-Delhi. Flipkart was launched in October 2007.
The idea was simple. Consumers could shop online and get books delivered to their doorstep. Flipkart registered 20 shipments in the year of its debut.
It wasn't an easy road as Internet penetration was abysmally low and e-commerce, unheard of. Bricks and mortar retailers were not threatened and many dismissed e-tailing as a foreign concept saying that Indians want to touch and feel' whatever they buy.
Flipkart started in 2007 as a door-to-door book delivery service with a cash on delivery option to win the trust of Indian consumer market as an online retailer.
Today, Indian e-commerce industry is already close to USD 30 billion in size and analysts expect this to zoom to USD 200 billion by 2026.
The growth of the sector was comfortably in sync with the meteoric rise of Flipkart.
From a modest two-bedroom apartment in Koramangala, the Bengaluru-headquartered company now has multiple offices across the country. A bulk of its operations are run out of a plush campus in the city that is spread over 1 lakh sq ft and houses 6,800 employees.
It was almost two years after starting the business that Flipkart got its first full-time employee in Ambur Iyyappa, who went on to become a millionaire, thanks to the ESOPs. The headcount was rapidly scaled to 150 that year.
In October the same year, Accel Partners came on board as an investor and pumped in USD 1 million. A few months later, US hedge fund Tiger Global bought into the vision and Flipkart received a funding of USD 10 million.
A number of funding rounds later, Flipkart raised USD 1.4 billion from Tencent, eBay and Microsoft, followed by USD 2.5 billion investment by SoftBank Vision Fund last year.
The year 2010 was an important one for Flipkart with the company shipping among other things, electronics and mobile phones. This category now makes up for a significant portion of the sales for the online platform.
It was also the year when Flipkart pioneered 'Cash on Delivery' in India, which changed the course of online retail in the country as consumers now paid for items only after receiving them, adding a layer of comfort to online shopping. Flipkart launched its logistics unit, eKart to smoothen deliveries.
In 2016, Flipkart achieved the milestone of 100 million registered customers and saw Sachin and Binny earning a spot among TIME magazine's list of 100 most influential people.
The company made its first acquisition with WeRead and since then, it has acquired a number of companies including Letsbuy, FX Mart, fashion e-tail player Myntra and UPI-based payments startup PhonePe. It also bought a majority stake in companies like Jeeves and ngpay.
At the beginning of last year, Kalyan Krishnamurthy was named as the new CEO, moving Binny Bansal to the role of Group CEO. Reports suggested that Tiger Global wanted better control of the organisation and hence, the decision.
Bansals' e-commerce bet finally has paid off big time and set the 2018 M&A counters ringing with US retailer Walmart buying about 77 per cent stake in Flipkart for USD 16 billion.
After seeing ups and downs in business through 11-years, he has exited the business by selling his entire stake of over 5 per cent for around Rs 7,000 crore.
Binny, not related to Sachin, will retain his 5.5 per cent stake and will be Chairman of the company's Board. He said Walmart is the ideal partner for the next phase of Flipkart journey.
Who are Sachin Bansal and Binny Bansal
Sachin comes from a business family, while Binny's father was a banker and mother a public servant.
He started his career with an IT firm Techspan in 2005 and then joined Amazon Web Services in January 2006. Binny joined Amazon in January 2007 after working for an IT firm Sarnoff.
The Chandigarh duo envisaged making shopping easier. Sachin started operations of Flipkart in August 2007 and was joined by Binny Bansal about a month later.
Sachin Bansal and Binny Bansal, though unrelated, are former colleagues from Amazon. The IIT Delhi alumni dared to venture into online marketing with a capital of Rs 4 Lakh in 2007
In January 2016, Sachin had to give up his role as Chief Executive Officer at the company reportedly due to performance related issues.
Flipkart rejigged its management and Binny took over as CEO. A year later, Kalyan Krishnamurthy was elevated to the position of CEO of Flipkart.
The firm operated in India but it has parent firm registered in Singapore to avoid complex Foreign Direct Investment (FDI) rules and high rate of taxes imposed on corporates.
The company has been raising billions in funding and investing in expansion and growth of the business.
Flipkart's parent firm has reportedly posted loss of Rs 8,771 crore for the financial year ending March 2017.
Its sales were around USD 4.6 billion in the financial year ended March 31, 2018.
Sachin Bansal's letter to Flipkart employee before his farewell
Sachin Bansal has written a letter to his employees before bowing out of the company he founded 11 years ago with Binny Bansal.
"Flipkart truly upheld audacity and customer centricity and I got to work with the best people. We took on some of the biggest challenges and solved many complex problems for India.
Sadly my work here is done and after 10 years, it’s time to hand over the baton and move on from Flipkart. But I’ll be watching and cheering from the outside — Flipsters, you better continue to do a good job!
I’ll be taking some long time off and focus on finishing a few personal projects which I haven’t been able to find time for. Will catch up on gaming (and see what kids are playing these days) and brush up on my coding skills.
I will always cherish the relationships I’ve built and amazing experiences I’ve had. Wishing all the best to the whole team."
Sachin Bansal has cashed out his 5 per cent stake in Flipkart and wants to focus on pending personal projects
Role of Japanese technology company SoftBank Group Corp
The head of Japanese technology company SoftBank Group Corp. said Wednesday it has reached an agreement to sell its stake in Indian e-commerce company Flipkart to Walmart.
Softbank founder and CEO Masayoshi Son did not give details in confirming the deal, which has been widely anticipated. He mentioned the agreement while discussing the company's quarterly results.
Son did say he was doubling his initial investment with the sale. The agreement was reached overnight, and an official announcement is coming soon, he said.
SoftBank's sprawling empire encompasses telecommunications, financial-technology, solar energy, ride-booking services and the Pepper companion robot.
Son made the comments on Flipkart casually during his earnings presentation. Later, when he was told no announcement had been made, he told reporters: "Oops. I already said it."
Tokyo-based SoftBank reported Wednesday January-March its profit totalled 24 billion yen ($219 million), down from 580.5 billion yen the previous year.
Quarterly sales totalled 2.35 trillion yen ($21 billion), up 1 percent from 2.32 trillion yen.
Walmart makes a $16 billion bet on India's booming economy
Online sales have exploded in India over the past couple years and Amazon has been fighting hard to catch up to Flipkart.
Walmart has been expanding its online services in the U.S. to better compete with Amazon. The retailing giants are expanding that battle overseas.
In China, where more than 700 million people are online, it has had a tough time competing with local players like Alibaba, another company partnering with SoftBank.
US retail giant's $ 16 billion investment in Flipkart is being seen as its way of competing with its domestic rival Amazon at a global level.
Will Flipkart’s cash-burn hurt Walmart?
It seems the US company’s investors weren’t convinced with Walmart’s decision to buy 77% stake in Flipkart as the shares of US e-commerce giant lost around $8 billion in value on Wednesday, taking the total loss since April to $17.5 billion. This is being reported that a large part of its Flipkart investment is already being considered a write-off by investors in the US.
Walmart making back-door entry?
RSS affiliate Swadeshi Jagran Manch has alleged that US retail giant Walmart was "circumventing" rules for a "back-door entry" into India with its USD 16 billion majority stake acquisition of Flipkart and sought Prime Minister Narendra Modi's intervention to safeguard "national interest".
The SJM's letter to the prime minister, asking him to ensure that interest of those at the bottom of the pyramid in retail and agriculture space are safeguarded, came on a day Walmart Inc acquired 77 per cent stake in Flipkart.
The Swadeshi Jagran Manch, which is the economic wing of the Sangh, claimed that Walmart is using e-commerce route to circumvent existing rules which bar foreign companies in multi-brand retail and dubbed its acquisition of Flipkart a "back-door entry" into Indian market.
(With inputs from AP, PTI)
